Wednesday, May 18, 2016

Facebook surrenders its privacy in IPO documents

The unveiling came late Wednesday when the company that depends on people to share their lives online filed its plans to raise $5 billion in an initial public offering of stock. It's a revelatory moment that prospective investors, curious competitors and nosy reporters have been awaiting for two yrs. During that time, Facebook established itself as a communiions hub and emerged as a thrt to the Internet's most powerful company, Google Inc.
This Dec. 13, 2011 file photo, shows of worker inside Facebook hdquarters in Menlo Park, Calif. Facebook, the social network that changed "friend" from a noun to a verb, is expected to file as rly as Wednesday to sell stock on the open market. Its debut is likely to be the most talked-about initial public offering since Google in 2004. (AP Photo/Paul Sakuma, file)As with almost anything crafted by a bunch of lawyers and bankers, the 197-page prospectus that Facebook filed with the Securities and Exchange Commission is filled with boilerplate legalese and mind-numbing s.
But there were some juicy details in there, too.
Above all, the documents confirmed what everyone had been hring: Facebook is very profitable and getting stronger. The company Mark Zuckerberg started with some friends in 2004 has seen its annual revenue soar from $777 million in 2009 to $3.7 billion last yr. Facebook's rnings have grown at a similar rate too, ballooning from $122 million in 2009 to $668 million last yr.
Facebook ended 2011 with $3.9 billion in cash. That's a relatively small amount compared to the nrly $45 billion that Google has in the bank.
Facebook's prosperity has been fueled by a stdy expansion of its audience, making its website a more attractive marketing vehicle for ads, which account for most of the company's revenue. Facebook ended last yr with 845 million users, up 39 percent from 608 million at the end of 2010. Those users share their interests and preferences prodigiously. Facebook recorded a daily average of 2.7 billion "likes" and comments during the final three months of last yr.
Facebook has become so addictive that more than half its audience — 483 million users — log in every day.Facebook's revenue total disappointed some people who pored through the documents. One rson: The company erates about $4.39 in revenue per user. "That is a surprisingly low ," said University of Notre Dame finance professor Tim Loughran, who studies IPOs. Google's annual revenue of nrly $38 billion works out to more than $30 per user of its services.
"Facebook needs to find more ways to get revenue from their users," Loughran said.
Facebook listed its most promising expansion opportunities as Brazil, Germany, India, Japan, Russia and South Kor. The company, based in Menlo Park, Calif., eventually hopes to make its service available in China if it can navigate rules requiring online content to be censored if the Chinese government considers it to be objectionable or obscene.
The IPO filing gives some clue when Facebook is likely to surpass 1 billion users. If it can add users at roughly the same pace as last yr, Facebook should surpass the 1 billion mark this summer.
As it is, Facebook alrdy erates 44 percent of its revenue outside the U.S. The company is also developing other sources of revenue beyond online advertising faster than Google. Advertising accounted for 85 percent of Facebook's revenue last yr. It made up 96 percent of Google's. Facebook's other revenue sources include the 30 percent cut of sales it takes from game makers and other external appliions companies that sell things on its website.
The big question is whether Facebook's s are impressive enough to fetch the lofty IPO price. It's still too rly in the process for Facebook to revl how much it intends to ask for its shares, but Wednesday's filing provides some clues. Facebook valued its Class B common stock at $29.73 at the end of December, down slightly from appraisals of $30.07 in June and September. If this unfolds like most hot IPOs, Facebook will probably try to sell its shares at a premium. That could mn an IPO price in the $35 to $40 range. Investor demand, though, ultimately will dictate the pricing.
Facebook still hasn't listed how many outstanding shares it has, but the documents make it possible to make a rough estimate of the company's market value at the end of last yr. Financial notes in the filing show Facebook calculated it had about 2.9 billion fully diluted shares at the end of December. That works out to a market value of about $86 billion, based on Facebook's $29.73-per-share self-appraisal.
At that price, the nrly 534 million shares that the 27-yr-old Zuckerberg owns are worth about $16 billion. The filing indies Zuckerberg will sell an unspecified of shares in the IPO to cover a tax bill for exercising a stock option to buy 120 million shares. Zuckerberg has been collecting a $500,000 salary but that will fall to one dollar next yr at his own request, according to the filing.
Other big winners in the IPO include: Facebook co-founder and old Zuckerberg friend, Dustin Moskovitz, who owns nrly 134 million shares; venture capital firm Accel Partners, which owns 201 million shares; Russian investor DST Global Ltd., which owns 131 million shares; and former PayPal CEO Peter Thiel, who owns nrly 45 million shares.
Hundreds of other Facebook employees could become millionaires because they receive stock as part of their compensation. Facebook has about 3,200 employees now, nrly 2,000 more than it did two yrs ago.
Facebook also shared some of its biggest worries in the filing. Among other things, it cited Google's ability to use its dominance in Internet srch to promote its Google Plus social network. Facebook also frets the possibility that regulators in Europe and the U.S. may impose tougher privacy rules that would make it more difficult for the company to stockpile information about its users.
Source: The Associated Press

No comments:

Post a Comment